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The big story in Ontario’s budget isn’t the political concessions to the NDP. Nor is it the austerity measures aimed at eliminating the deficit.

The real news relates to our slumping economy and the sense that no one in government — or the private sector — knows how to deal with it.

Finance Minister Charles Sousa argued in his budget speech that eliminating the deficit is the “single most important step” the government can take to revive the economy.

But it’s not the only step.

Eliminating the deficit is a means to an end, not an end in itself. It is a necessary, but not sufficient condition for economic growth.

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Beyond a balanced budget, how can we kickstart the Ontario economy?

On budget day last week, as the finance minister was talking up his talking points on The AgendaTVO’s The Agenda, viewers were shown a series of charts detailing the back and forth bargaining between the minority Liberal government and the New Democrats (who hold the balance of power).

For each NDP demand — be it auto insurance, youth job-creation, long-term health care — the television program showed the NDP’s request and the government’s response.

“Asked and Answered” flashed up on the screen. But when the broadcast switched from budgetary politics to economics, a new heading should have been superimposed over Sousa: “Asked and Unanswered.”

The finance minister seemed clueless about how to deal with the bigger challenges in his debut budget. It’s about the economy, Sousa.

Since 2001, Ontario’s productivity growth has been a dismal 0.4 per cent annually, versus 2.3 per cent in the U.S. Since 2005, the gap in R&D has also widened significantly.

While the U.S. remains the major destination for Ontario’s goods, our share of American imports is roughly half what it was in 2000 (now 5.6 per cent, down from 9.5).

Hitch our wagon to the listless U.S. market? We can barely keep pace.

Now back to our homegrown fiscal problem: Even as Ontario tries to eliminate its current $11.7 billion deficit by 2017-18, its debt servicing costs will grow (as the accumulated debt tops $300 billion). Interest costs will rise from about $10.4 billion now to $14.5 billion — a 40 per cent rise — making it the third-biggest expenditure in the budget, after health and education.

Is there a way to balance the budget while bolstering economic growth? New Democrats and some economists on the left believe stimulus is the only answer (the deficit be damned). Tories and business economists call for tax cuts (again, the deficit be damned).

One recent analysis, from the Institute for Competitiveness & ProsperityInstitute for Competitiveness & Prosperity, argues that Ontario must rein in the deficit because of rising interest costs, but should also ramp up educational spending because it lags other provinces (per capita). It also calls for more investment in infrastructure, such as transit, because it pays future dividends. And it recommends tax reforms to discourage tax dodges, encourage R&D, reward patents, and remove incentives for small businesses that keep them small.

All good ideas, but not good enough to rescue us from our collective slump. The truth is that Ontario lacks the fiscal levers to magically transform Ontario’s economic landscape. It has no central bank to print money, and interest rates are at record lows anyway.

Government can help set the table, but it can’t singlehandedly instill an entrepreneurial spirit in Ontario’s commercial classes. And that’s the sad truth you won’t find in the latest budget.

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